Ten Principles of Economics - Part 71. Economics is the study of how society manages its scarce resources. In most societies, resources are allocated not by a single central planner but through the combined actions of millions of households and firms. Economists therefore study how people make decisions: how much they work, what they buy, how much they save, and how they invest their savings. Economists also study how people interact with one another. | CHAPTER 31 AGGREGATE DEMAND AND AGGREGATE SUPPLY 725 IN THE NEWS How Consumers Shift Aggregate Demand As we have seen when people change their perceptions and spending they shift the aggregate-demand curve and cause short-run fluctuations in the economy. According to the following article such a shift occurred in 1996 just as the presidential campaign of that year was getting under way. Consumers Get the Credit for Expanding Economy By Richard W. Stevenson Washington President Clinton claims the credit for himself and analysts cite an array of other possible factors but the most important source of the economy s remarkable resilience and vibrancy this year appears to be the consumer. For most of this year Americans have spent prodigiously on homes cars refrigerators and dinners out carrying forward an aging economic expansion that as recently as January seemed in danger of expiring. In the process they have largely ignored warning signs that they are becoming overextended. The consumer spending spree was a major force in the surprisingly robust economic data released Friday economists said. The Labor Department estimated that the economy created 239 000 jobs in June far more than expected making that month the fifth consecutive one with strong employment gains. The unemployment rate now stands at percent the lowest in six years and economic growth is so rapid that it has revived fears of inflation. Among the industries showing the biggest gains was retailing which added 75 000 jobs in June nearly half of them in what the government classifies as eating and drinking places. Job growth was also strong at car dealers gas stations hotels and stores selling building materials garden supplies and home furnishings. Employment in construction was up by 23 000 reflecting in part the continued upward strength of home building. Just how long consumers can carry on with their free-spending ways however remains an open question and one that is critical to policymakers at .
